Operations and Supply Chain Management
Review the CASELET Answer All Questions
Part A – Case study CASELET Covid-19 and Supply Chain Management in Healthcare
Healthcare supply chain management is the regulation of the flow of medical goods and services from manufacturer to patient.
The coronavirus disease 2019 (COVID-19) outbreak has exposed significant glitches in health care supply chains, which are complex and highly fragmented. Health care requires 5 categories of products: pharmaceuticals, personal protective equipment, medical devices, medical supplies, and blood. Each of these categories has a distinct supply chain, and the failure of any 1 of these chains can wreak havoc on the health care system. There is a drive towards improving the efficiency and effectiveness in the healthcare sector throughout the total supply chain. This supply includes many hospitals and physician practices, especially as payers start to tie claims reimbursement amounts to quality and cost performance. Many organizations have looked to the billing and services portion of the revenue cycle for budget decreases, but others have started to examine their healthcare supply chain management.
The supply chain generally refers to the resources needed to deliver goods or services to a consumer. In healthcare, managing the supply chain is typically a very complex and fragmented process. Healthcare supply chain management involves obtaining resources, managing supplies, and delivering goods and services to providers and patients.
To complete the process, physical goods and information about medical products and services usually go through a number of independent stakeholders, including manufacturers, insurance companies, hospitals, providers, group purchasing organizations, and several regulatory agencies. However, by promoting efficiency in the healthcare supply chain, hospitals and physician practices can create substantial cost-reducing opportunities across their organization. The implications of COVID-19 for the health care supply chains are powerful and far-reaching. Urgent action must be taken to ensure that our supply chains support our health care providers at this critical time and in the future.
Here is a look at what goes into healthcare supply chain management and how healthcare organizations can overcome major challenges to further reduce spending.
The Current healthcare supply chain
The healthcare supply chain management?
Take a moment to think about what providers use every day to treat patients. Providers use a myriad of items, such as syringes, prescriptions drugs, gloves, pens, papers, and computers. Employees involved in healthcare supply chain management are responsible for stocking organizations with the products providers need and managing inventory.
However, managing supply chain is not as simple as making sure providers have enough gloves.
“Simply stated, supply chain is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole,” James Spann, Practice Leader of Supply Chain & Logistics at Simpler Healthcare, said in a 2015 interview.
“The challenge for hospitals is to align the supply chain to the care delivery model.”
The healthcare supply chain starts at the medical product manufacturer where items are produced and sent to a distribution center. Depending on the type of product, hospitals can either purchase inventory directly through the manufacturer or distributor, or the transaction can be conducted through a group purchasing organization, which establishes a purchasing contract with the manufacturer on behalf of the hospital.
Medical products are then sent to the healthcare organization, where the goods are stocked into inventory for providers and patients. The organization ensures that providers are not left without essential medical products and patients have access to potentially life-saving tools.
Another aspect of healthcare supply chain management involves the participation of regulatory agencies, such as the Federal Drug Administration, and healthcare payers, including Medicare and private health insurance companies. Regulatory agencies and payers determine if a medical resource is fit for consumer use and whether providers will be reimbursed for using it on specific patients.
Healthcare supply chain management is unique because each stakeholder has their own interests to protect. Different stages in the supply chain flow may be focused on their own goal. Providers may want to use a specific product because they were trained with it, whereas hospital executives aim to purchase the most affordable quality items.
Since supply chain goals are not always aligned within an organization, the healthcare supply chain management process can be inefficient and fragmented. Healthcare organizations must take into account numerous requests and viewpoints to settle on specific product budgets.
Patients also have a voice in the healthcare supply chain management process. Healthcare organizations may be able to regularly order the correct sizes of gloves and keep them stocked, but some patients may need more customized medical products, such as latex-free options, depending on their health status.
Likewise, providers may prefer a specific brand or type of medical product, which could lead to cost concerns.
For example, providers may prioritize their own preferences for certain products, while financial managers attempt to cut healthcare costs and reduce out-of-date products. Oftentimes, hospitals face hoarding or squirreling away of certain products by providers.
“In most cases, clinicians just want the products when they need them,” Spann explained. “But to ensure that happens they oftentimes hoard or opt manage their own supplies. This can contribute to cost variance and off contract spending which are hard to uncover. One more invisible cost that is often overlooked is the time spent looking for supplies or waiting for someone to deliver what they need.
”Misaligned incentives and independent goals can disrupt the flow of the supply chain for many healthcare organizations.
References: Adapted from:DiChiara, J., 2020.7 Reasons To Merge Revenue Cycle And Supply Chain Management. [online] RevCycleIntelligence. Available at: <http://revcycleintelligence.com/news/7-reasons-to-merge-revenue-cycle-and-supply-chain-management> [Accessed 8 November 2020].
QUESTION 1 [30MARKS]
Based on the caselet, and your own experiences or observations, identify and critically discuss any three key challenges or problems in the Health Care Supply Chain / Organisation during the Covid-19 pandemic.
QUESTION 2 [20MARKS]
“Diversification of supply chains is probably going to be the new normal going forward,” says Stephen Smith, head of warehousing and storage at Bidvest International Logistics (BIL), one of South Africa’s largest logistics businesses. “Companies will be wary of putting all their eggs in one basket, so we expect that products will be sourced from numerous suppliers as opposed to one or two, which is currently the norm.
”Do you agree with the above statement? Why or why not? Substantiate your discussion with at least two examples from two different industries.
QUESTION 3 [20MARKS]
Apply the Value Chain model to demonstrate how you can improve the operations of an organisation of your choice. Critically examine how sustainability can be included into the Value Chain.
QUESTION 4 [30MARKS]
Select any organisation of your choice. Identify any one operational challenge within the organisation and apply lean thinking to improve the operations.
You need to produce a mini report demonstrating an understanding of the operations management problem and provide workable solutions with a cost/benefit analysis and a detailed action plan.